S.Korea Govt. tips 5% economic growth

Wednesday, 15 December 2010 00:01 - - {{hitsCtrl.values.hits}}

SEOUL (AFP) - South Korea’s government on Tuesday was upbeat about economic prospects for next year, predicting growth of around 5 percent compared with lower forecasts from the central bank and think-tanks.

In its 2011 economic outlook, the government also raised the current-year growth forecast to 6.1 percent from 5.8 percent previously.

“Bolstered by the steady pace of global recovery and growth in domestic demand, the Korean economy is expected to post about 5 percent growth next year,” the finance ministry said in the report.

But it cautioned that growth could be slower than the projection, depending on overseas market conditions.

“Our (2011) forecast is based on the International Monetary Fund’s 4.2 percent growth projection for the global economy.... I think other (economists) have somewhat conservative views,” finance ministry official Yoon Jong-Won told reporters.

The central bank last week tipped 6.1 percent growth this year and 4.5 percent next year as the economy returns to a normal growth pace. Several research institutes tip the lower range of 4 percent next year.

The finance ministry vowed closely to watch the policy direction of major economies, foreign capital flows and changes in asset markets, and to take preemptive measures in case of any abnormal signs.

Authorities “will be cautious not to let abundant liquidity and foreign capital inflows pose unrest to price stability and asset markets”, it said.

The ministry last month announced it would restore a tax on foreigners buying government bonds, warning that excessive capital flows could destabilise the economy and push the won even higher.

The move was the latest in a series of measures by emerging markets to curb a flood of capital from the United States and elsewhere, which is pushing up their currencies.

The ministry said Tuesday it would let the foreign exchange market move in line with economic fundamentals and supply and demand.

Its report said private consumption and corporate investment would remain on a recovery track next year, helping bolster domestic demand.

Exports would expand 10.2 percent compared with a 28.5 percent increase for this year, while imports would grow 14.8 percent compared with a 31.5 percent rise this year.

“Our economy is on track to normalisation after a swift rebound from the financial crisis,” the report said.

“At this moment, we expect that the recovery will continue, but it is still necessary to pay close attention to the possibility that the economy could return to a downturn.”